Foreign investors have pulled back from Canada’s stock market like they put their hand on a hot stovetop.
Driving the news: A record $35 billion in foreign cash was withdrawn from the Canadian stock market last quarter, according to new Statistics Canada data. The reason for the retreat was undoubtedly U.S. tariffs stoking investor worries about the soundness of Canada’s economy.
- However, Canada’s main stock index still grew slightly over that time. This was likely due to the concurrent selloff in U.S. stocks, with patriotic Canadian investors putting some earnings back into their home market.
Why it matters: Investors crave certainty, and with more exposure to the erratic U.S. than pretty much any other country, Canada’s stock market can’t deliver that right now. And with a relatively small home base, domestic investors can’t prop up the market all by themselves.
Yes, but: Canada’s stock market does have its advantages in uncertain times. Namely, its high concentration of “defensive sectors” that tend to stay steady no matter the investing climate, like financials and energy.
Big picture: Thanks in part to this strength, Canada’s main stock index has continued to grow this quarter, even rattling off a 10-day winning streak and setting a new record high. But to avoid potential future tariff-related difficulties, a bit of decoupling from the U.S. is needed.—QH